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Costly union-only agreements result in fewer city projects


By Sal Rodriguez, Pacific Research Institute

From street repairs to building construction, municipal infrastructure projects are costly, but often necessary, endeavors. To get them done in the most cost-effective manner possible, city taxpayers are best served by having open, competitive markets for contracts to complete such projects efficiently and at the best price.

This might sound like common sense.

Enter government-mandated project labor agreements (PLAs).

PLAs are bargaining agreements with labor unions that dictate everything from work arrangements to pay and benefits before a project can move forward.

In practice, when governments require PLAs, they’re effectively mandating union-labor for projects and excluding non-union workers and contractors which prefer not to be hamstrung by such requirements.

This is significant because most construction workers are not unionized – just 12 percent of America’s private-sector construction workers belonged to a union in 2021, which means that PLAs exclude the vast majority of workers.

In the event nonunion labor is used, either the workers or the bidders will generally have to cover the costs of union dues or fees.

Taken together, then, PLAs reduce competition for bids on public works projects, exclude workers and require increased costs in accordance with union demands.

Reduced competition, higher costs

To zero in on the cost side, research from across the country has shown that PLAs bring with them higher costs to public projects.

In 2011, researchers at the National University System Institute for Policy Research studying the impact of PLAs on school construction projects in California concluded that PLAs are associated with 13 percent to 15 percent in higher costs.

A decade later, in 2021 research published by the RAND Corp. studying the effects of PLAs on the construction of homeless housing in the city of Los Angeles likewise found that PLAs “added approximately $43,000 per housing unit to projects covered by the agreement – a 14.5 percent increase in construction costs.”

That study also found that PLA rules deterred many developers from building larger projects, which would trigger PLA requirements. The net result in that case was hundreds fewer homeless housing units than might have otherwise been built.

This is far from a California phenomenon. Over on the East Coast, the Beacon Hill Institute has documented broadly similar increases in costs to school construction projects in Connecticut, Massachusetts, New Jersey and Ohio, and higher bid offerings in New York.

None of this should be surprising. After all, the very purpose of government-mandated PLAs is to ensure more money goes into the pockets of union workers and unions. On the one hand, there might be politically palatable reasons to do so – union workers and unions are a political constituency.

On the other hand, there are costs to doing this – to taxpayers (in the case of higher direct costs) but also to the city as a whole when considering opportunity costs for the excess spending. Or in the case of homeless housing in Los Angeles, the costs of deterring 800 additional units from being built and leaving hundreds of homeless people on the streets as a result.

Bans on mandated PLAs

Two dozen states have enacted legislation restricting state and local governments from mandating project labor agreements. This includes Arizona, Idaho, Montana, Nevada, Idaho and Utah. California and Washington are western states that notably encourage the use of project-labor agreements.

In 2011, California Gov. Jerry Brown went to particularly great measures to make this happen. An existing piece of legislation pertaining to tuberculosis was subject to a “gut and amend” process in which the entire text of the bill was swapped out mid-session to instead threaten to withhold state funding for local government projects if those governments prohibited PLAs.

This threat came at a time when a number of California cities and local governments either approved or were considering measures to restrict PLAs. The city of San Diego was one of them.

How.the debate over PLAs played out in San Diego

In June 2012, San Diego voters considered the following proposition: “Should the City of San Diego be prohibited from requiring contractors to use Project Labor Agreements for City construction projects, except where required by law, and should the Mayor be required to post online all construction contracts over $25,000?”

At the time, opponents warned that passing the measure “prohibition of PLAs could cost the city hundreds of millions of dollars” because of the legislation signed by Gov. Brown. Regardless, voters liked the idea of open competition and keeping costs low. Measure A was approved by 58 percent of city voters.

Fast forward a decade later. The city in fact did not lose out on state-funding, because the measure left open the option of using PLAs if state law required it. However, the unions wanted any restrictions on PLAs gone.

Measure D was placed on the ballot in November 2022 with the support of Mayor Todd Gloria, Gov. Gavin Newsom, and, of course, union groups. The measure was described as being, “For Infrastructure. For Fairness.”

“By requiring tough anti-discrimination provisions and lifting an outdated ban on union protections, Measure D gives workers the fair shot and fair wages they deserve,” supporters argued in a ballot statement that emphasized the need for infrastructure projects and climate-change threats.

Opponents, including the National Black Contractors Association, warned that repealing Measure A would discriminate against the vast majority of local construction workers, shut out local apprenticeship programs and “send taxpayer dollars to Los Angeles contractors” by favoring union labor. Alas, in a reversal of the vote a decade prior, nearly 58 percent of city voters approved the measure.

Just a few months later, on Feb. 3, 2023, the San Diego Union-Tribune reported, “Big changes that favor labor unions could be coming soon to large municipal construction projects built by the city of San Diego, such as fire stations, libraries, sewer pipelines and bridges. San Diego officials say they plan to create a blanket project labor agreement with local unions that would apply to projects citywide.”

The Associated General Contractors of San Diego warns that such a move would result in a spike in costs to city infrastructure projects and would require the city to get its labor from outside of the city. “A blanket PLA will have major impacts to the city,” AGC leader Eddie Sprecco told the San Diego Union-Tribune. “The city should do a project-by-project justification and analysis for a PLA. If done honestly, the city wouldn’t need a threshold, but likely it would only apply to projects above $40 to $50 million.”

Cities should resist PLA mandates if the goal is cost-effective construction

If the primary goal of a city government is to divert public funds to politically powerful unions by way of project labor agreements, then PLAs make sense. But if the goal is to responsibly manage the finite resources of local taxpayers by ensuring public works projects are awarded according to who can do the best work at the lowest cost, cities must resist union pressure to mandate PLAs.


Sal Rodriguez is opinion editor for the Southern California News Group and a senior fellow with the Pacific Research Institute. He is the author of “Dynamism or Decay? Getting City Hall Out of the Way,” published by the Pacific Research Institute.